Total returns from real estate investment trusts in 2013, while a little less generous than in previous years, should still be pleasing to investors, according to BMO Nesbitt Burns.
BMO initiated coverage on 19 Canadian REITs and real estate corporations today. While most received “outperform” ratings, BMO believes investors should be picky, selecting names with solid corporate structures, rising distributions, smaller capitalizations, and those that may be potential takeover targets.
“Our sector preferences include apartments for its defensive characteristics and strong internal growth profile, industrial based on recovering fundamentals and expected cap rate compression and seniors housing based on solid earnings growth momentum,” BMO said in a research note. “Our geographic preferences include the United States and to a lesser extent Western Canada which are expected to deliver greater economic growth and more pressure on cap rates.”
These are the names BMO is recommending investors load up on:
Allied Properties REIT
Initiated at “outperform” with a price target of $36.25. BMO believes it offers long-term growth potential in urban markets.
Amica Mature Lifestyles
Initiated at “outperform” with a price target of $10. BMO believes it has above-average growth potential.
Initiated at “outperform” with an $18 price target. BMO likes the name for its attractive yield and growing U.S. exposure.
Initiated at “outperform” with a price target of $70. BMO likes the REIT for being Canada’s dominant apartment landlord, with its solid balance sheet and management team.
Brookfield Canada REIT
Initiated at “outperform” with a price target of $32. BMO recommends the name for its high-quality office portfolio and notes it trades at a discount valuation.
Initiated at “outperform” with a price target of $27. BMO likes its “solid internal growth prospects.”
Canadian Real Estate Investment Trust
Initiated at “market perform” with a price target of $47. It likes CREIT for its “highly disciplined management, focus on operations, portfolio quality, lower payout ratio and industry-leading balance sheet.”
Chartwell Retirement Residence
Initiated at “outperform” with a target of $12. BMO sees the REIT picking up momentum as it delivers on occupancy improvements and cost controls.
Initiated at “outperform” with a $25 price target. BMO believes its growth opportunities are coming together this year.
Dundee Industrial REIT
Initiated at “outperform” with a $12 price target. It believes the REIT offers investors exposure to the improving Canadian industrial sector while offering stable cash flows, an attractive yield and above-average growth prospects.
Initiated at “outperform” with a $26.90 price target, recommending it for its “institutional quality portfolio” and its discount valuation.
Healthlease Properties REIT
Initiated at “outperform” with a $12 price target. Likes the REIT for its lease structure that provides cash flow stability by transferring operational risks to tenant operators.
Initiated at “outperform” with a $14 price target. Recommends the REIT for its “high-quality apartments” and units that are trading at a double-digit discount to net asset value.